Rebosis Property Fund has a huge debt burden of R9.5 billion and a sector-high loan-to-value (LTV) ratio of 72.2%, but its founder and CEO Sisa Ngebulana is pinning his hopes on a rescue deal currently being negotiated with unnamed prospective new investors to significantly reduce both.
Speaking during the fund’s interim results presentation for the six months to the end of February 2021 on Tuesday, Ngebulana pointed out that the goal is to reduce the group’s LTV to below 40%.
He did not comment on how much Rebosis would need to slash its debt by, but the comment around LTV is noteworthy considering the group’s record gearing levels.
“Getting our LTV below 40% will be in line with market expectation … We also want to get our ICR [interest cover ratio] to 2.5 times. We hope to get to these levels by our next results [for the full-year to end of August 2021, traditionally published in November],” said Ngebulana.
“We are making positive progress with local and offshore institutions, with an investment objective to restructure and strengthen our balance sheet, lower the LTV and improve the ICR … We continue to trade under cautionary until a transaction closes,” is all he would add.
The fund’s ICR stood at 1.3 times at the end of its interim period.
Rebosis issued the cautionary on April 7, advising shareholders of talks underway with the prospective investors, but could not reveal further details due to non-disclosure agreements.
“Shareholders are advised that the company has signed non-disclosure agreements and [is] currently in negotiations with local and offshore institutions and pension funds for a transaction that, if successfully concluded, could fundamentally change the financial matrix of Rebosis and crystallise value for shareholders,” the group noted at the time.
Meanwhile, Ngebulana talked up the group’s interim results on Tuesday, saying the turnaround is “ahead of expectations” despite the ongoing effects of Covid-19.
“Covid continues to affect our retail portfolio … Entertainment aspects, such as cinemas, ice rinks and games arcades, within our shopping centres remain a challenge … But we are seeing improvement in the food and beverage and services sectors.”
However, he warned that a possible third wave of Covid-19 infections in the country and further lockdowns could adversely impact the overall retail turnaround.
Despite Rebosis’s high debt levels and LTV, Ngebulana said the group “continues to operate a robust business” and fulfil its debt obligations.
It is however worth noting that the group has not paid out dividends for two consecutive years due to its debt and liquidity issues that were a concern for the market even before Covid-19 hit.
For its latest interim results, Rebosis deferred its decision to pay out a dividend to its year-end.
The fund reported a 12.8% decline in like-for-like net property income – to R512 million before bad debt, Covid-19 reprieves, and disposals. This was due to tough economic conditions, made worse by the pandemic.
Its normalised distributable income before once-off items came to R184 million for the interim period.
However, after a “once-off recognition of deferred liability”, the group’s distributable income decreased from R22 million to a loss of R71 million.
“[A] dispute resolution process relating to the deferred liability of the Company to Billion Group has now been concluded with R175 million recognised as the net deferred payment liability,” Rebosis noted in its interim results press statement.
Ironically, the dispute was linked to Billion Group, which is a company founded by Ngebulana. In 2016, Billion sold its Baywest Mall and some of its other properties to Rebosis, after Billion canned plans to separately list the group as a development fund on the JSE.
Rebosis noted in its results media statement that it weathered significant headwinds during the reporting period (like other counters), but that it was bolstered by its sovereign underpinned office portfolio.
“Retail collection rates remained robust however, with collections rate in excess of 97% reported. Rental concessions of R15 million granted during the period to assist small tenants, especially in the entertainment and food & beverage sectors, was less than anticipated,” it added.